Chemours Announces Completion of Planned Procedures by the Audit Committee with Respect to Internal Review

Rhea-AI Summary

Chemours (CC) discloses material weaknesses in its internal controls over financial reporting, including delayed payments and accelerated collections, leading to immaterial revisions in financial statements. The company is implementing a remediation plan to address these issues.

Positive

• None.

Negative

• Material weaknesses identified in internal controls over financial reporting
• Delayed payments and accelerated collections impacting financial statements
• Lack of transparency with the Company's Board of Directors by former senior management members

Insights

Financial Analyst

The disclosure by Chemours regarding material weaknesses in internal controls over financial reporting is a significant concern for investors and stakeholders. From a financial perspective, the identification of material weaknesses suggests potential risks in the accuracy and reliability of financial statements. Although the company asserts that no material misstatements occurred, the need for immaterial revisions indicates lapses in financial oversight. Investors should consider the implications of these findings on the company's financial integrity and the effectiveness of its management team.

Moreover, the delayed payments and accelerated collection of receivables could affect liquidity ratios and working capital management, which are key indicators of a company's short-term financial health. The fact that these activities were not transparently communicated to the Board raises questions about corporate governance practices. The long-term impact will depend on the company's ability to effectively implement remediation plans and restore confidence among investors and regulators.

Corporate Governance Expert

Chemours' announcement touches upon core issues of corporate governance and transparency. The lack of communication with the Board by former senior management members could be indicative of broader oversight issues within the company. Actions taken by the Compensation and Leadership Development Committee to withhold cash and equity compensation from these individuals serve as a corrective measure and signal to stakeholders that the Board is addressing the governance lapses.

Investors should be attentive to the forthcoming proxy statement for further details on these actions. The effectiveness of the Board's oversight functions, particularly the Audit Committee, will be under scrutiny as the company moves forward with its remediation plan. The proactive disclosure of these issues, while unsettling, also provides an opportunity for the company to demonstrate its commitment to strengthening its governance mechanisms and internal controls.

Risk Management Analyst

The identification of material weaknesses by Chemours is a clear signal to risk management professionals to reassess the company's risk profile. While the weaknesses did not result in material misstatements, they expose the company to increased scrutiny from regulators and investors alike. The acceleration of receivables and delayed vendor payments could be interpreted as aggressive accounting practices, potentially designed to enhance financial results.

Investors should monitor the company's progress in implementing its remediation plan, as success in this area could mitigate some of the risks posed by these weaknesses. However, failure to address these issues promptly and effectively could lead to reputational damage, regulatory penalties and a loss of investor confidence. The company's future financial disclosures will likely be viewed with increased skepticism until it can demonstrate a strengthened control environment.

Discloses Material Weaknesses and Remediation Plan

WILMINGTON, Del.--(BUSINESS WIRE)-- The Chemours Company (“Chemours” or “the Company”) (NYSE: CC), a global chemistry company with leading market positions in Titanium Technologies (“TT”), Thermal & Specialized Solutions (“TSS”), and Advanced Performance Materials (“APM”), today announced that, as disclosed in the Company’s Annual Report on Form 10-K filed today, March 27, 2024, the Audit Committee of the Board of Directors has completed its planned procedures with respect to the internal review that the Company had previously disclosed on February 29, 2024, with an update provided on March 7, 2024.

The Audit Committee’s internal review of working capital actions determined that payments of up to approximately $100 million were delayed until the first quarter of 2024, primarily to certain vendors that were originally due to be paid in the fourth quarter of 2023; and collection of up to approximately $260 million of receivables that were originally not due to be received until the first quarter of 2024 were accelerated into the fourth quarter of 2023. The Audit Committee’s review determined that similar actions, though to a lesser extent, were taken in the fourth quarter of 2022, resulting in a delay of up to approximately $40 million of payments to vendors that were originally due to be paid in the fourth quarter of 2022 until the first quarter of 2023; and the acceleration of the collection of up to approximately $175 million of receivables into the fourth quarter of 2022 that were originally not due to be received until the first quarter of 2023.

The Audit Committee’s internal review determined that there was a lack of transparency with the Company's Board of Directors by three former members of senior management. The Compensation and Leadership Development Committee of the Company’s Board of Directors took the results of the Audit Committee’s internal review into account and exercised full negative discretion in making cash and equity compensation determinations with regard to these former members of senior management.

Additional details regarding these Compensation and Leadership Development Committee actions will be included in the Company’s Compensation Discussion and Analysis in its proxy statement for its 2024 Annual Meeting, when filed.

Material Weaknesses and Remediation Plan

In connection with the Audit Committee’s internal review, management completed an evaluation of the Company’s internal control over financial reporting as of December 31, 2023 and identified four material weaknesses, the details of which can be found in the Company’s Annual Report on Form 10-K filed today, March 27, 2024.

The material weaknesses did not result in any material misstatements of the Company’s financial statements or disclosures but did result in immaterial revisions to the Company’s March 31, 2023, June 30, 2023 and September 30, 2023 financial statements and a revision to the Company’s Balance Sheet as of December 31, 2022 and the Company’s Statement of Cash Flows for each of the years ended December 31, 2022 and 2021.

The Company is in the process of designing and implementing enhancements to its internal control over financial reporting. Additional details on the material weaknesses, as well as the steps the Company has taken and is continuing to take to remediate them, can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission.

About The Chemours Company

The Chemours Company (NYSE: CC) is a global leader in Titanium Technologies, Thermal & Specialized Solutions, and Advanced Performance Materials providing its customers with solutions in a wide range of industries with market-defining products, application expertise, and chemistry-based innovations. We deliver customized solutions with a wide range of industrial and specialty chemicals products for markets, including coatings, plastics, refrigeration and air conditioning, transportation, semiconductor and consumer electronics, general industrial, and oil and gas. Our flagship products include prominent brands such as Ti-Pure™, Opteon™, Freon™, Teflon™, Viton™, Nafion™, and Krytox™. The Company has approximately 6,200 employees and 28 manufacturing sites, and serving approximately 2,700 customers in approximately 110 countries. Chemours is headquartered in Wilmington, Delaware and is listed on the NYSE under the symbol CC.

For more information, we invite you to visit chemours.com or follow us on X (formerly Twitter) @Chemours or on LinkedIn.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240327441525/en/

INVESTORS

Brandon Ontjes

VP, FP&A and Investor Relations

+1.302.773.3309

investor@chemours.com



Kurt Bonner

Manager, Investor Relations

+1.302.773.0026

investor@chemours.com

NEWS MEDIA

Cassie Olszewski

Corporate Media & Brand Reputation Leader

+1.302.219.7140

media@chemours.com

Source: The Chemours Company

FAQ

What did Chemours disclose in its Annual Report on Form 10-K filed on March 27, 2024?

Chemours disclosed material weaknesses in its internal control over financial reporting.

What actions were taken by the Audit Committee regarding working capital actions?

The Audit Committee found delayed payments of up to $100 million and accelerated collections of up to $260 million.

What did the Compensation and Leadership Development Committee do in response to the internal review?

The committee exercised full negative discretion in determining cash and equity compensation for former senior management members.

What did management identify in its evaluation of internal controls over financial reporting?

Management identified four material weaknesses.

What revisions were made to Chemours' financial statements due to the material weaknesses?

Immaterial revisions were made to the financial statements for March 31, 2023, June 30, 2023, and September 30, 2023, as well as the Balance Sheet as of December 31, 2022, and the Statement of Cash Flows for the years ended December 31, 2022 and 2021.

What is Chemours doing to address the material weaknesses in its internal controls?

The company is designing and implementing enhancements to its internal control over financial reporting.